In India, there are several types of debt financial instruments available to investors. These instruments represent avenues for borrowing and lending funds, either by governments, corporations, or financial institutions.
1. Government Securities (G-Secs):
- Issued by the Government of India to finance its fiscal deficit and other expenses. They are considered risk-free because they are backed by the government.
- Examples:
- 10-Year Government Bond: A bond issued by the Government of India with a maturity of 10 years.
- Treasury Bills (T-Bills): Short-term debt instruments issued by the government with maturities of less than one year.
2. Corporate Bonds:
- Debt securities issued by corporations to raise capital for various purposes, such as expansion or working capital.
- Examples:
- Reliance Industries Ltd. (RIL) Bonds: Bonds issued by RIL to finance its projects and operations.
- Tata Steel Bonds: Bonds issued by Tata Steel to fund its business activities.
3. Commercial Paper (CP):
- Short-term debt instruments issued by corporations to raise funds for short-term liabilities and operational needs.
- Examples:
- HDFC Bank Commercial Paper: Short-term debt issued by HDFC Bank to meet its short-term financing requirements.
- ITC Ltd. Commercial Paper: Short-term debt issued by ITC Ltd. for funding its day-to-day business operations.
4. Certificate of Deposit (CD):
- Negotiable money market instruments issued by banks to raise funds from the market. CDs have specific maturity dates and offer fixed interest rates.
- Examples:
- State Bank of India (SBI) Certificate of Deposit: CDs issued by SBI to investors for a specified period with a predetermined interest rate.
- ICICI Bank Certificate of Deposit: CDs issued by ICICI Bank to institutional and individual investors.
5. Debentures:
- Long-term debt instruments issued by corporations or government entities with a promise to repay the principal along with interest at a specified future date.
- Examples:
- NHAI (National Highways Authority of India) Debentures: Long-term debt securities issued by NHAI to finance road infrastructure projects.
- L&T Finance Holdings Debentures: Debt instruments issued by L&T Finance Holdings to raise long-term capital.
6. Fixed Deposits (FD):
- Investment instruments offered by banks and financial institutions where investors deposit funds for a fixed tenure at a predetermined interest rate.
- Examples:
- SBI Fixed Deposit: Fixed deposits offered by State Bank of India with various tenure options and interest rates.
- ICICI Bank Fixed Deposit: Fixed deposits offered by ICICI Bank with flexible maturity periods and competitive interest rates.
7. Money Market Instruments:
- Short-term debt instruments with high liquidity and low risk, traded in the money market.
- Examples:
- Call Money: Short-term funds borrowed and lent among banks for a period of one day.
- Commercial Bills: Short-term bills of exchange issued by firms to meet their financing needs.
These debt instruments provide various avenues for investors to earn fixed income based on their risk appetite, investment horizon, and financial goals. They play a crucial role in the financial markets by facilitating borrowing and lending activities across different sectors of the economy.